Current Tax Year ended 5th April 2019
In the current tax year ended 5th April 2019, we general advise a salary of £702 per month, depending on your additional personal income to date. Not including additional income, this allows for dividends of £37,926 to be paid before higher rate tax is charged, leaving you with a personal tax liability of the year of £2,437.50, not including payments on account. If you haven’t yet maximised your dividends up to the higher rate tax threshold, you have until the 5th April 2019 to do so.
New Tax year ended 5th April 2020
As previously announced by the Government, the personal allowance will increase for the £11,850 to £12,500 effective 6th April 2019. The NIC Primary and Secondary thresholds will also increase, meaning that directors who currently take a monthly salary of £702, can expect an increase to £719, effective from the 6th April 2019.
The higher rate tax limit is also increasing effective 6th April 2019 which should allow for an increased level of dividends before higher rate tax is charged, approximately £41,372, resulting in an estimated personal tax liability due 31st January 2020 of £2,662.50, not including payments on account. As a general guide (and based on only the £719 per month salary as additional income) here are the anticipated levels of tax due on specific levels of dividend payments, not including any payments on account or payments already made:
|Net Dividend||Est Personal Tax Bill 2019/20|
As long as you have sufficient reserves in your business, maximising your dividends before higher rate tax is charged will result in more money in your pocket, (approximately £3,425).
We will provide confirmation of all of the above at the start of the new tax year, or for more information, please speak with your dedicated accountant.